Central bank bond-buying programmes aren’t working, BlackRock’s Peter Fisher has claimed.
Quantitative easing is supposed to push investors into riskier assets, Mr Fisher, senior director of the BlackRock Investment Institute and a former under secretary of the US Treasury and executive vice president of the Federal Reserve Bank of New York, said.
“It isn’t working,” Mr Fisher said. “Mostly, it drives up the price of the low-risk assets, as we’ve seen in Europe today.”
The ECB, which meets tomorrow, has said it will begin monthly purchases of €60bn of bonds this month. Government bonds in many European countries have rallied before the purchases.
The US Federal Reserve’s bond-buying programme, that wound down last year, wasn’t much more successful, he said. “It didn’t really work here, it worked at the margin as a little chase for yield. People want to hoard the best assets.”
The risk of deflation in Europe may mean that a rate increase from the US Fed won’t dent the prices of longer-term treasuries, Mr Fisher said.
Investors have been flocking to treasuries because of the higher relative returns even with the Fed saying it expects to raise interest rates this year.
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